Anda di halaman 1dari 34

A PRESENTATION ON THE TOPIC

“AUDITING”
MEANING:
Audit is the examination and verification of
records and other evidences by an individual or a

RASHWANTH
body of persons so as to confirm whether the
records and other evidences present a true and fair
picture of whether they are supposed to reflect.
There are two types of Audit:
 Financial audit.
 Non- Financial audit.

2
BENEFITS OF AUDIT:
Audit yields multiple benefits. Some of these
benefits are the following:

RASHWANTH
 Identify opportunities for improvement.

 Reality check.

 Identify outdated strategies.

 Increase management’s ability to address


concerns.
 Enhances teamwork.

 Increase commitment to changes.

3
FINANCIAL AND NON-FINANCIAL AUDIT
Financial audit Non- Financial audit

RASHWANTH
 Relies primarily on  Relies primarily on
standards set externally. standards set internally on
the basis of customers and
competitor information.
 Procedures are fluid and
 Procedures are formulized
should be adapted by each
and consistent from
company. Measures should
company to company.
be created that suit the
Compliance with
company’s needs.
procedures adds credibility
to the audit.
4
CONTD..
Financial Non- Financial

RASHWANTH
 Standards are essentially  Standards should change
the same from audit to as performance improves.
audit.  Focus is on exceeding
 Focus is on complying with standards set internally or
standards set by external by industry competitors.
groups.  Audience is generally
 Audience is often primarily internal, with data being
external, with audit used as used primarily to improve
a way of building credibility. performance.

5
CONTD..
Financial Non- Financial

RASHWANTH
 Generally conducted yearly.  Conducted on average,
every 18 to 24 months.
 Focuses on measures that  Focuses on a broad range
effect only financial of functions that contribute
performance. to the success of functions
that contribute to the
success or failure of a
particular process.

6
LIMITATIONS OF AUDIT
 It can neither help in prioritizing changes nor in
allocating resources.

RASHWANTH
 Audit cannot mobilize people to take action.

 Audit cannot generate better data than the


measures used to gather those.
 An audit, by itself cannot improve performance.

 An audit should not be used for wrongful purposes.


It should not be used for personal indictment and to
justify improve actions.

7
AUDIT PROCESS:
An audit process consists of following stages:
 Staffing the audit team.

RASHWANTH
 Creating an audit project plan.

 Laying the groundwork for the audit.

 Analyzing audit results.

 Sharing audit results.

 Writing audit reports.

 Dealing with resistance to audit recommendations.

 Building an ongoing audit program.

8
STAFFING THE AUDIT TEAM:

An audit team should consist of people who

RASHWANTH
have substantial knowledge of systems and
processes within the company. An audit team
should consist of people who have knowledge in
diverse areas.

9
Some other aspects that should be considered are:
 Team should consist of newcomers as well as
experienced people.
 Importance is given to people who is more experienced

RASHWANTH
in auditing.
 Functional expert should be included in the audit team.
 The person who are closely associated should with the
process should be included in the audit team.
 Team members should possess strong analytical and
interpersonal skills.
 Understanding of company’s overall strategy and its
goals and objectives.

10
CREATING AN AUDIT PROJECT PLAN
An audit plan helps in better allocation of
resources, especially if the resources are scarce. It

RASHWANTH
makes sure that audit tasks are completed on time.
It also ensures accountability and responsibility of
the management by clearly stating what is to be
done, who is responsible for which task and when
the audit should be completed.

11
LAYING THE GROUND WORK FOR THE AUDIT
The following steps will help an audit run
smoothly:

RASHWANTH
 Gathering executive support.

 Make arrangements with the area being audited.

 Develop a checklist.

12
ANALYZING AUDIT RESULTS

When the audit is completed, the gaps

RASHWANTH
between a company’s targets and its actual
performance can be identified. These gaps usually
perform to specific areas in the various functions of
the management. The audit results identify the
opportunities for improvement, but arranging the
areas in terms of importance is a difficult task.

13
SHARING AUDIT RESULTS
The audit results are pressurized before the
members of the executive team, the managers who

RASHWANTH
work in the area covered by the audit, the audit
team members and anyone else who is affected by
the audit or is interested in the results, in a
feedback meeting. The audit team’s objective
during the meeting is to present a clear and simple
picture of the current situation, as revealed by the
audit.

14
WRITING AUDIT REPORTS
 After the audit work is completed, the whole
process of auditing, the resultant findings and

RASHWANTH
recommendations are written in a formal report
canned an Audit Reports.
 An audit report may be a plain summary of the
audit. But such a report is not recommended
because the probability of taking action in this case
is less.
 An audit report serves as a baseline document for
measuring improvement in performing possible in
future audits.
15
DEALING WITH RESISTANCE TO AUDIT
RECOMMENDATIONS

The audit team gives its recommendations


when the audit is completed. These

RASHWANTH
recommendations may not be always accepted,
especially when they require people to change their
way of working.

Types of resistance:
 Direct resistance to audit recommendations.

 Indirect resistance to audit recommendations.

16
BUILDING AN ONGOING AUDIT PROGRAM

It helps in monitoring improvement

RASHWANTH
performance over a specified period of time. They
help in systematically monitoring the changes
taking place in the company’s work environment
and also help managers deal with resistance to
change.

17
AUDIT TOOLS AND TECHNIQUES:
 Budget.
 Timing.

RASHWANTH
 Projectability.

 Geography.

 Surveys.

 Questionnaires.

 Focus groups.

 Interviews.

 Direct observations.

18
MANAGEMENT AUDIT:
A management audit is defined as “an examination
of the conditions and a diagnosis of deficiencies with
recommendations for correcting them.”
As per John C. Burton, “in a management audit,

RASHWANTH
the auditor will see the management is getting
information relevant to the decisions and actions which it
must take. This will require a much more intensive
analysis of information needs and the efficiency of the
existing system in meeting them. The auditor will not
have to decide whether management is making the right
strategic and operative decisions but rather whether the
management has available to it and is using the relevant
information and techniques necessary to evaluate the
various alternatives that exist.”
19
OBJECTIVES OF MANAGEMENT AUDIT:
 To critically analyze and evaluate management
performance.

RASHWANTH
 To detect and overcome existing management
deficiencies and resulting operational problems.
 To evaluate the methods and processes used by
the management to accomplish its organizational
objectives.
 It helps to determine the effectiveness of the
management in PODC the organization’s activities.
 It helps to ascertain the appropriateness of the
management’s decisions for achieving the
organization objectiveness.
20
TYPES OF MANAGEMENT AUDIT:
 Complete management audit.
 Compliance management audit.

RASHWANTH
 Program management audit.

 Functional management audit.

 Efficiency management audit.

 Propriety audit.

21
COMPLETE MANAGEMENT AUDIT
 Complete management audit evaluates the firm’s
current activities and measures the gaps between

RASHWANTH
its existing policies and the objectives, and its
actual activities.
 Complete management audit is however, not
designed to punish the inefficient or reprimand
people who make honest mistakes.

22
COMPLIANCE MANAGEMENT AUDIT
 Auditors are asked to identify the gaps between the
company’s existing policies and objectives, and its

RASHWANTH
actual practice. However, in this case, the auditors
do not make any recommendations for
improvements.
 They simply present their observations to the top
management. The top management consults to
personnel to decide whether, what, or how
corrective action should be taken

23
PROGRAM MANAGEMENT AUDIT
Program management audit is similar to
complete management audit and compliance

RASHWANTH
management audit; the only difference is being the
fact that it focuses on a specific program. Program
management audit is designed to appraise
performance within a specified program and it
doesn’t disturb other operations of the firm.

24
FUNCTIONAL MANAGEMENT AUDIT

Functional management measures the

RASHWANTH
difference between the actual performance of an
organization and its objectives, with emphasis on a
particular function.

25
EFFICIENCY AUDIT
Efficiency audit is conducted to ensure that
money is so utilized as to generate handsome

RASHWANTH
returns.

The objectives of efficiency audit are:


 To invest the capital in areas that generate optimum
returns.
 To plan and invest judiciously in various functions.

26
PROPRIETY AUDIT
Propriety audit is conducted to examine the
effect of the management’s decisions and actions

RASHWANTH
on the society and the public. While conducting the
audit, the auditor examines all transactions of the
company to find out whether any of the transactions
has negatively affected public interests.

27
ORGANIZING THE MANAGEMENT AUDIT
 Devising the statement of policy.
 Allocation of personnel.

RASHWANTH
 Staff training program.

 Time and other aspects.

 Frequency.

28
INTERNAL AUDIT
o Traditional perspective.
o Modern perspective.

RASHWANTH
Roles:
 Check whether the existing controls are effective
and adequate.
 Check whether the financial reports and other
records show the actual results of the company.
 Check whether the sub-units of the organization
laid down by the management
29
SOCIAL AUDIT:

Blake, Fredrick and Myers define social audit

RASHWANTH
as, “an systematic attempt to identify, analyze,
measure, evaluate and monitor the effect of an
organization’s operations on society.”

Social audit has been often used wrongly to


mean activities pertaining to a company’s social
programs, social surveys, etc.

30
FEATURES OF SOCIAL AUDITS:
 Social audits adhere to the specified norms. These
norms may adhere to the government’s standards

RASHWANTH
of social performance, standards established by the
organization and norms set by outside agencies.
 The aim of conducting a social audit is to influence
the policies, objectives and actions of the
concerned organization to improve its social
performance.
 Social audit is conducted by professionals who
have knowledge about the social area being
audited.
31
TYPES OF SOCIAL AUDIT
 Social balance sheet and income statement.
 Social performance audits.

RASHWANTH
 Macro- micro social indicator audits.

 Constituency group attitudes audits.

 Government mandated audits.

 Social process or program audits.

32
AUDIT EVIDENCE
 Persuasive.
 Relevant.

RASHWANTH
 Unbiased.

 Objective.

33
APPROACHES TO SOCIAL AUDIT:
 Inventory approach.
 Program management approach.

RASHWANTH
 Cost-benefit approach.

 Social indicator approach.

34